The airline industry may be ripe for mergers financially, but pilots are finding themselves unwilling to negotiate. Delta Air Lines (NYSE: DAL) announced an overhaul of its operations today after talks with Northwest Airlines (NYSE: NWA) have reportedly hit a stalemate. The move should help the airline reduce its costs while it continues to work towards finding a potential suitor that would give it financial economies of scale.

A letter from Lee Moak, head of the Delta pilots union, said that the carriers haven't been able to negotiate a benefits and seniority agreement that satisfies both ends. It also refers to the discussions in the past tense, which suggests that further talks are not likely for the time being. This didn't come as a surprise to many investors as reports in the past indicated that negotiations were moving slowly on the negotiation of a key agreement.

Meanwhile, Delta announced that it will offer voluntary severance payouts to roughly 30,000 employees and cut domestic capacity by an extra 5 percent this year as part of its plan to deal with soaring fuel costs. A memo to employees noted that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program and other initiatives. The move will eliminate more than half of its 55,044 person workforce.

Fuel costs are beginning to become a serious problem for airlines, especially after OPEC announced that it would not raise production levels for the year. Delta's actions followed other initiatives like fare hikes and reduced routes by Northwest and Continental as airlines struggle to remain profitable. So far, Southwest Airlines (NYSE: LUV) remains as one of the only truly profitable airline despite recent grounded planes.

In the end, airlines are still facing many problems with high costs that need to be solved. A merger may have solved some of these problems by enabling the airlines to obtain an economies of scale whereby costs could be lowered through bulk purchasing of fuel and different routes could be combined to increase efficiency. Unfortunately, while the deal may have worked out financially, pilots shot it down once again. However, this is still a situation worth watching in case talks resume.

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